The Australian Bureau of Statistics (ABS) just released the GDP numbers for the first quarter of 2020.
GDP declined by 0.3% according to the ABS. Don’t forget that it only takes two quarters of GDP declines for the country to officially be in a recession.
Perhaps what was even more significant was that building approvals were down 1.8% according to the Australian Financial Review, compared to a decline of 2.6% in March. Economists had apparently been expecting a decline of more than 10% for April. That’s a big, positive difference. Is this it? Or has the decline been delayed to May 2020 (or beyond)?
Is Australia about to enter a recession?
It seems almost inevitable that Australia will report another negative decline of GDP in the June 2020 quarter. Think of all the jobs that were lost, shops that were closed and economic activity that simply stopped in April. The only hope of there not being a recession was for the March 2020 quarter to not show a decline.
But plenty of ASX shares are up on today’s news.
The Commonwealth Bank of Australia (ASX: CBA) share price is up 2.1%.
The National Australia Bank (ASX: NAB) share price is up 3.2%.
The Australia and New Zealand Banking Group (ASX: ANZ) share price is up 3.8%.
The Westpac Banking Corp (ASX: WBC) share price is up 3.2%.
The regional banks are also performing strongly such as Bendigo Bank (ASX: BEN) which is up 4.3% and the BOQ (ASX: BOQ) share price is up 2.2%.
I think most investors had already been expecting Australia to show that it was going into recession. People are now looking at how quickly the country will exit the recession. The government is doing its best to support certain industries with a potential cash grant to pay for sizeable construction or sizeable renovations.
Construction shares like Brickworks (ASX: BKW) and CSR (ASX: CSR) are up 1% and the Boral (ASX: BLD) share price is up around 4.4%.
I think there are still some big question marks for some industries that could change forever. What’s going to happen to shares like Scentre (ASX: SCG) and Vicinity Centres (ASX: VCX)? I’m not sure if they will be able to get back to their previous highs before COVID-19.
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Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned.